Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

In anticipation of the Republican sweep in the elections on Tuesday, Senators Mike Lee (R-Utah) and Ted Cruz (R-Texas) wrote to Senate Majority Leader Harry Reid (D-Nev.) in September warning him not to offer any significant legislation during the lame duck session following the elections. Knowing Reid, they presumed the worst from him:

Presumably, a lame duck session would be used [by you] to try to pass partisan, unpopular bills in November or December that might be indefensible before the … election….

Deliberately planning to reconvene the Senate in a lame-duck session to address major new legislation would subvert the will of the American people, lessen accountability and do lasting damage to the dignity and integrity of this body’s proceedings.

This article first appeared at TheNewAmerican.com on Monday, November 3, 2014:

Last Wednesday’s agreement among 51 countries belonging to the Organization for Economic Co-operation and Development (OECD) in Berlin to share tax information across borders in a continuing effort to crack down on tax evasion was announced with great excitement but precious little logic.

German Finance Minister Wolfgang Schaeuble told the group at a meeting entitled the “Global Forum on Transparency and Exchange of Information for Tax Purposes” that the agreement is “a joint contribution to more transparency and fairness in our globalized 21st century.” Britain’s Finance Minister George Osborne added, “Tax evasion is not just illegal, it is immoral. You are robbing from your fellow citizens and you should be treated like a common thief.” Said Osborne, the new treaty “strikes a blow on behalf of hard-working taxpayers.”

A careful look reveals that the new treaty in fact is designed to benefit tax collectors, not taxpayers.

This article first appeared at The McAlvany Intelligence Advisor on Monday, November 3, 2014:

Judge Learned Hand, circa 1910.

In his letter to the Washington Post on Saturday, libertarian economist Donald Boudreaux unwittingly exposed the logical fallacy behind the OECD’s (Organization for Economic Co-operation and Development) new “tax evasion” treaty: they really think they can help the little taxpayer by increasing the collection of taxes on the evaders. Wrote Boudreaux:

Consider the U.S.: in 31 of the 67 post-war years from 1946 to 2013, Uncle Sam’s budget deficit rose … when his tax receipts increased.

This fact means that Uncle Sam almost as often as not responds to each dollar of additional tax revenue by increasing his spending by more than a dollar – thus imposing a heavier tax burden on future taxpayers.

In other words, tax avoiders (not evaders) are performing a public service by doing what they can to reduce government revenues which constrain government spending.

Two favorite economists, Donald Boudreaux of George Mason University and Mark Perry of the University of Michigan, have contested and decried the dominant social theme that America’s middle class is disappearing. For instance, back in January their arguments reached the pages of the Wall Street Journal in which they stated flatly that

This winter morning I bought a bouquet of wildflowers from the supermarket. Its price was $5.99. The flowers are fresh, beautiful, fragrant – and from Ecuador.

Ponder this fact.

For a mere one hour and eight minutes of work, a minimum-wage worker in the United States can acquire a bouquet of fresh flowers grown in South America. In other words, for 68 minutes of working in the U.S., a minimum wage worker can

Like most conservatives, I don’t like subsidies or government intervention in markets. But I do like U.S. sugar policy, which, according to some, runs counter to these core conservative ideals.

America’s sugar policy has my support and the support of so many other conservatives because it’s the best line of defense we have against an OPEC-like market that threatens our food security and 142,000 U.S. jobs…

The policy we have chosen — placing tariffs on imported sugar — guarantees imports into the U.S. market (America is the world’s biggest sugar importer) but keeps subsidized foreign oversupplies from bankrupting U.S. producers. And, it operates without a federal budget outlay, which means it doesn’t cost taxpayers a dime.

True, this policy isn’t perfect. But it’s necessary. Until Brazil and other countries stop distorting the market with excessive subsidies, our no-cost policy is the least intrusive way to keep 142,000 Americans off unemployment rolls and prevent America from becoming dependent on the OPEC of sugar.

First, I checked Rooney’s voting record vis-à-vis the Constitution and it’s a forgettable 73. What that rating tells me is that this guy needs help. He is muddled in his thinking, but perhaps he is worth saving rather than

Economist Donald Boudreaux has once again blown away the smoke surrounding the mantra of the day: we’re getting poorer, having to make do with less, our children will suffer even more than we do, etc., etc. It’s awful. Something must be done!

Right.

He performs an exercise that others have performed in the past: he looks in a 1956 Sears catalog and compares the prices of common items to those charged today for those same items. Then he calculates the amount of hours of labor required to pay for them. Facts are facts. Truth is truth. As Winston Churchill once said, “Truth is incontrovertible. Panic may resent it; ignorance may deride it; malice may distort it; but there it is.”

Economist Donald Boudreaux uses himself as an example. He reads in the Washington Post one day that the government, in its infinite wisdom, has decided that all economists must be paid $500,000 a year, not a penny less. Boudreaux admits that he doesn’t make that much – half a million a year is a sum “which is multiple times my current annual earnings” – and then asks his students: “would I be excited about this news?”

Most people’s’ reaction, I’m sure, would be “good for you!” You’re finally getting paid what you’re worth. It’s a great gettin’ up mornin’!

Boudreaux doesn’t think so. He considers himself “an ordinary and none-too-accomplished professor of economics at George Mason University” and knows that if he were really worth that much, the free market, or what’s left of it, would reward him accordingly. But because he isn’t – he may be right, although I like his writings a lot – he’d be

This is nearly incomprehensible to me. New York City Mayor Michael Bloomberg is, according to Wikipedia, the 10th richest man in the country. According to me, he’s close to being the maddest. He is banning food contributions to the homeless in his never-ending quest to be the city’s food-nanny:

Richter has been collecting food from places like the Ohav Zedek synagogue and bringing it to homeless shelters for more than 20 years, but recently his donation, including a “cholent” or carrot stew, was turned away because the Bloomberg administration wants to monitor the salt, fat and fiber eaten by the homeless.

I’m speechless at the man’s audacity and hubris. (Since I’m writing this, am I “wordless?”) Apparently, so is Bloomberg. When asked about how he could defend such a preposterous mandate, he mumbled

Governor of New Jersey at a town hall in Hillsborough, NJ 3/2/11 (Photo credit: Wikipedia)

Chris Christie is a great example of someone who, on the hustings, sounds wonderful: less government, tough on unions, balance the budget and all that sort of thing. For a brief moment, Ann Coulter fell for him as well.

But let reality intrude and all the falsehoods and chimera and gloss disappear. Here’s the guv on gouging:

Having visited some of the hardest-hit areas of our state, and having seen firsthand the suffering people are experiencing, I assure New Jersey’s residents and retailers that we are taking a zero-tolerance approach to price gouging. Fuel, electricity, food, and a place to sleep are not luxuries, certainly not for individuals who have been displaced from their homes and in many cases have limited resources at their disposal. We are not asking businesses to function as charities. We require that they obey New Jersey’s laws – or pay significant penalties.

He is a statist after all. In fact, to be completely accurate, he thinks government’s role is to override the market and intrude and reward and punish according to some tissue-paper standard of “right” and “good.” The proper word – get ready! – is

Disasters can give an ailing construction sector a boost, while unleashing reinvestment that actually improves stricken areas and the lives of residents. Ultimately, Americans always seem to emerge stronger and rebuild better in the wake of disaster.

Happily and predictably, my friend (I don’t know him, but I know his thinking, with which I agree) Donald Boudreaux jumped onto the article with a letter to the editor pointing out the

Each man insists that America’s economy can be harmed by inexpensive imports – in other words, harmed by opportunities for voluntary exchanges that lower Americans’ cost of living.

He starts with Romney:

By promising to raise taxes on Americans who buy Chinese-made goods, Mr. Romney again promised to break his campaign promise to not raise taxes. That he is unaware of the contradiction isn’t promising.

This is one of the most startlingly clear explanations of how government interference works. You know that I think Donald Boudreaux is one of the clearest-thinking economists alive today. His letter to the Winston-Salem Journal proves it:

Closing this “loophole” effectively obliges garment makers in Central America and the Dominican Republic to use American-made thread – rather than less-costly thread from Asian producers – when producing the likes of jeans and t-shirts for sale in the U.S.

Your teacher asks you to challenge me to give “one good reason why the law should not require that women be paid the same as men for the same work.” I’m happy to oblige. There are many good reasons, but I’ll here stick to one.

(Photo credit: Wikipedia)

Once in a while one of the brainwashed kids raises his (or, in this case, her) hand. It’s too bad that Annie is only doing “homework” encouraged (required?) by her teacher. Perhaps her teacher got so frustrated with Annie’s unwillingness to go along with the socialist model being taught – enforced – in her government school that she threw up her hands and decided to challenge Boudreaux through Annie. I don’t know.

But Boudreaux, without the heavy ideological overtones that I generally bring to such a discussion, answers her question: because each job is different.

What might look like the same work to outside observers – to government officials, lawyers, or even the workers themselves – might well be very different work.

Is the worker Mr. Smith more experienced than the worker Ms. Jones? Is Mr. Smith less likely than is Ms. Jones to take time off of work to care for children or sick parents? Is Mr. Smith less likely than is Ms. Jones to quit in order to move with a spouse to another city? Is Mr. Smith a bit more helpful than is Ms. Jones with customers? Is Mr. Smith slightly more willing than is Ms. Jones to stay on the job a few extra minutes after the workday officially ends in order to help with important unfinished business?

He then makes this important point: only the employee and the employer can determine what’s fair. Both are motivated to come to the best possible terms of employment, serving their own needs to the greatest extent possible, and this can only be done in a free market. Once any government gets involved, distortions and limits on freedom are the result.

Not that every employer always gets it right, but every employer does have strong incentives to get it right. If an employer underpays a woman, some other firm can increase its profits by hiring her away at higher pay.

I grieve that the government schools are determined to turn out little communists. I’m glad Annie raised her hand to ask her question, and that Boudreaux was there to answer it.

Your [Romney’s] wish to “label China a currency manipulator” means that you seek a pretext to impose (as your website says) “countervailing duties” on imports from China – which is to say, you seek a pretext for raising taxes on Americans who buy goods and services from China. (emphasis added)

FlipFlopMitPresley (Photo credit: JonMartinTravelPhotography)

Donald Boudreaux is one of my favorite economists, not so much because he is a logical thinker, but because he can express himself so eloquently. In his letter to Romney, Boudreaux says that he expects Romney to lie, distort, misstate, obfuscate – after all, it’s politics:

A campaign, after all, is not a seminar for discovering truth. It’s a verbal wrestling match to get votes by whatever means, regardless of how tawdry or devious.

But Romney’s obvious lack of understanding of international economics drove him crazy. Out of one side of his mouth Romney has repeatedly said: “I will not raise taxes on the American people. I will not raise taxes on middle-income Americans.” Of course he won’t. He can’t. If he is elected president, he’ll discover that his rants are verbal tissue paper: only Congress can raise taxes.

But that’s beside the point. The real point is that by threatening to impose duties on Chinese goods as punishment for being a “currency manipulator” Romney wants to raise taxes on those same middle-income Americans.

Boudreaux explains:

If you keep your promise to impose countervailing duties on imports from China you will thereby break your promise to not raise taxes on the American people. (Americans who buy imports from China are, after all, American people.)

But if you keep your promise to not raise taxes on the American people, you must – as I hope you will – break your promise to punitively tax those many Americans who buy imports from China.

But, hey, what would you expect from Romney? He’s running for president and will take “cheap shots” wherever he can, counting on Americans’ ignorance of how things work in the real world to support him. Saints preserve us!

The number of traditional manufactured products now being made obsolete by apps is staggering. Rolodexes, radios, cameras, wristwatches, alarm clocks, calculators, compact discs, DVDs, carpenters’ levels, tape-measures, tape recorders, blood-pressure monitors, cardiographs, flashlights, photo albums, file cabinets, as well as paper and ink for the likes of maps and calendars and notepads and books and envelopes and airline tickets and newspapers – these are among the many items whose manufacture is rapidly being rendered unnecessary by inexpensive apps.

apps (Photo credit: Sean MacEntee)

My wife Mary is about to purchase a new iPhone. [I tried to point Mary to a Windows Phone, but it was too late! -Ed.] One of the decisions she will have to make is which apps she will want to download to make her life easier. Good luck with that!

The point economist Boudreaux is trying to make in his letter to the Washington Post is that apps make life easier, or cheaper, or more convenient. And if that’s so – Mary will soon find out – then why would protectionists like Senator Sherrod Brown want to protect us from lower prices being offered by foreigners? This is old-school thinking: we need to protect American jobs, even if they don’t deserve it!

Boudreaux is great at asking good questions, usually rhetorically. I don’t expect his targets spend a lot of time responding with answers:

Does Sen. Brown believe that apps – many of which can be downloaded for free (!) – harm America’s economy? Does he hurl accusations at app developers? Does he wish to punitively tax Americans who download apps? If not, why does he imagine that America’s economy needs protection from Chinese actions that bestow the very same blessings on America’s economy as those bestowed by app developers – namely, a lowering of Americans’ costs of acquiring the services of manufactured goods?

There are some things apps can’t do. This from Boudreaux’s comments section:

Well, [some] sections of American manufacturing are safe, I have found that my phone does not perform well as a soup ladle, a chef’s knife, coffee grinder, corkscrew, air pump for tires, makes […] poor sponge in the bath, and I have pointed it at regressives and hit delete but they remain there.

The overall rate of return to R&D [research and development] is very large….However, these returns apply only to privately financed R&D in industry. Returns to many forms of publicly financed R&D are near zero.

(Photo credit: Wikipedia)

Thank you for that. Here is just one more example of government intervention that doesn’t pay for itself, and distorts the marketplace as well as the rhetoric of government “investment.”

It really doesn’t matter where the government “invests” taxpayer monies – the Chevy Volt, or research and development – the returns are nonexistent, and often horrifically costly. But the beat goes on: government must “invest” in R&D or “we’ll fall behind.”

Here’s the classic example of trying to keep up with other countries who are also failing. Quoting authors Cooper and Leshner who wrote in the Washington Post that “the United States may now risk falling behind in scientific discoveries as other countries increase their science funding,” Boudreaux reminds that the real advances in R&D take place with private funding, not government extractions of taxpayer funds and the arbitrary redirection of such funds into politically correct “investments.”

Cooper and Leshner review a number of “breakthroughs” that wouldn’t have happened without government financing, including, for example, government funded research on jellyfish nervous systems which “unexpectedly led to advances in cancer diagnosis and treatment, increased understanding of brain diseases such as Alzheimer’s, and improved detection of poisons in drinking water.”

Notice the phrase “unexpectedly.” In other words, lots of times nothing worthwhile comes out of these “investments.” When something positive happens, it is “unexpected.”

Or the Google search engine which came from another government “investment” into developing mathematical algorithms used to rank web pages. The authors fail to mention that it took huge private investments to turn that “breakthrough” into the massive success Google enjoys today. But that would get in the way of their thesis: government “investment” in R&D is unequivocally good.

But it really isn’t. Boudreaux quotes an economist from the Bureau of Labor Statistics:

The overall rate of return to R&D is very large….However, these returns apply only to privately financed R&D in industry. Returns to many forms of publicly financed R&D are near zero.

Attempts to centrally plan economies, or even to intervene in major ways into market economies, are very much like humans’ attempts to fly by dressing like birds and flapping fake wings: utterly futile, and potentially calamitous, because the most that can be observed of any successful economy are a handful of large details (assembly lines, retail outlets, money).

Consciously calling into existence steel factories, wheat farms, supermarkets, currency, and other apparently obvious keys to economic success, and then trying to get these things all to work together to achieve economic takeoff, is akin to a man strapping sheets of fake feathers to his arms and legs and trying to fly.

The effort simply won’t work, even if it appears to the untrained eye as if it should.

Edward Frost ornithopter (Photo credit: Wikipedia)

What a wonderful insight into how the free market works, from one of my favorite economists: Donald Boudreaux. It’s an expansion of “what’s seen hides what’s unseen” which cause government bureaucrats and politicians to think they understand things which are impossible to understand.

He says that the free market economy is indescribably complex, and then he attempts to describe it:

A market economy is indescribably vast and complex—its success depends on so many intricate, changing details all somehow being made to work smoothly together that the “facts” that are essential to its thriving cannot be catalogued with anywhere near the completeness that can be achieved by a 21st-century scientist studying and cataloging the “facts” that enable sparrows to fly.

A sparrow is complex compared, say, to a limestone rock. Compared to the modern market economy, however, a sparrow is extremely simple.

What isn’t seen, and can’t be seen, is the motive force of individual decisions on the part of each participant in the market – consumers and producers – that creates this living, breathing thing we call the market. It’s the organizing force behind the scenes that allows each actor to have a role.

And it’s this motive force – the invisible hand (HT: Adam Smith) – that politicians and bureaucrats (i.e., EPA, etc.) think they not only understand, but can control and direct. This is the ultimate hubris:

Too many people, including politicians, continue to believe that because they can observe a handful of bulky facts about the economy, they can thereby know enough to intervene into that economy in ways that will improve its operation.

That belief, though, is hubris. It’s very much like believing that you’ll fly if you simply strap on a pair of wings and commence to flapping madly.

The immediate aftermath of a natural disaster inevitably brings much higher prices for staple goods, such as lumber, batteries, fuel, and bottled water. Just as inevitably, these higher prices are roundly decried as unjust and inexcusable.

Hurricane (Photo credit: kakela)

Donald Boudreaux lives in New Orleans and experienced Hurricane Katrina (September 2005) and its aftermath. Part of the aftermath was uninformed people—some economists who should have known better—decrying the rise in the prices of staples, calling merchants offering them at the higher prices “gougers”—seeking only to take advantage of the situation.

In fact, as Boudreaux points out, they were simply responding to market forces: supply and demand:

Prices are not set arbitrarily. They are what they are for a variety of reasons. These reasons are summarized by the two words “supply” and “demand.” Prices reflect existing conditions of supply and demand.

If the price of bottled water rises, it does so either because supplies have fallen or because people’s demand has risen. In the wake of natural disasters, both of these effects kick in strongly.

He teaches us several things. First, there is the reality of the market. It will not be denied. It may be, and will be if Isaac results in the same thing happening, that prices of, say, bottled water, rises substantially. That is the reality. We need to face it:

The higher price per bottle reflects the underlying reality; it reflects the fact that bottled-water supply is lower and bottled-water demand is higher. In short, it reflects the fact that bottled water is now more valuable than it was before the disaster…

And how best to deal with this unfortunate reality? To begin, never pretend that reality is other than what it is. Face reality squarely, fully, and soberly.

Second, the market price for bottled water gives out information to consumers and producers. It’s vital information that they need in order to make sensible decisions:

If the market value of a bottle of water is $25, preventing merchants from charging a price higher than $5 shields consumers from the fact that potable water is now more precious than it was pre-disaster. The price cap also shields suppliers from this same truth.

The inevitable consequences of this hoax only add to the problems caused by the natural disaster. With the price artificially kept low—at its pre-disaster level—consumers will try to use this now-more-precious commodity today with no more care than they used it yesterday.

Lesson: when government intervenes in the market, it distorts the market which results in poor decisions being made by those participating in the market. In a nutshell that’s what government interventions always do.